The central banks of Canada, Japan. England, Switzerland, the United States Federal Reserve and the European Central Bank announced the launch of a coordinated action by all of them to provide liquidity through a dollar swap in what represents the first joint operation to prevent the coronavirus contagion crisis from spreading within the world economy. But not even this measure has calmed investors at all to the point that equity markets have fallen on a black Monday by an average of 8%.
The purchase of assets between sovereign bonds and federal agencies with mortgage guarantees while lowering the price of money up to 0% from 1% and 1.25% where it was until now. But without taking effect, as the futures have indicated in the stock exchanges on both sides of the Atlantic. To the point that US equities have had to stop trading on what is the third time that this radical measure has been carried out. In any case, something that all financial analysts agree on is that the stock markets are broken and do not attend to any relevant support.
On the other hand, the spillage in the pension and investment funds the losses move in a range that oscillates between 5% and 10% depending on the financial assets that make up your investment portfolio. In what constitutes the worst situation for both savings and investment in many and many years. It is not strange that some media compares this situation with that of the Great Depression of 1929. More than the economic recession that took place a little over ten years ago. We are all poorer than at the end of February.
User errors
Small and medium investors are losing a lot of money in such a short space of time. Worse and the only thing we can do at these levels is learn from the mistakes made. So that after a few months this scenario never happens again. In this sense, one of the biggest mistakes that small and medium investors have made is not investing their money under a value strategy. This means that these types of securities are more stable and generally develop their business in more mature sectors with strong entry barriers. We are talking about companies belonging to defensive sectors such as electricity or dedicated to non-cyclical consumption: medicines, food ... For example, financial assets such as Endesa, Ebro, etc.
A derivative of this strategy is based on the mistake made when trading speculative securities. That is to say, that in the end they can generate very spectacular losses in all kinds of scenarios in the equity markets. Even with the risk that they could go bankrupt and therefore leave all the money invested. It cannot be forgotten that this class of investments are not considered as such, but instead focus on clearly speculative operations. And that in the current circumstances it can be a monumental mistake to enter their positions, no matter how low their prices are on the financial markets.
Don't go against the tide
Nothing is less profitable than going against the trend of the equity markets. In this sense, it should be remembered that you must always be with what these financial assets mark. And therefore, in the recessive periods There will be no choice but to be at liquidity levels so that what all small and medium investors are experiencing now does not come to pass. It will not give much more peace of mind from now on and we can also take advantage of real business opportunities. Rather, we can benefit from more competitive prices than until now. And this is a lesson that we will have to learn from the events that we are experiencing.
Never average down
Many times the negative position of our securities portfolio is due to the evolution of the markets, in this case bearish, but it is true that in others they are derived from our own mistakes. And one of the most relevant is to average down and that is something that some small and medium investors are doing to limit your losses. Not surprisingly, some investors when they are losing money in the stock market choose to apply this strategy to limit their losses. And the only thing that they will achieve is to delve into their already high handicaps with a great power of loss in their positions and that can be much higher than usual.
While on the other hand, another of the mistakes that small and medium investors usually make is rush into your decisions and that can lead to an unwanted situation. In this sense, before making a decision it is recommended that a financial or stock market analyst help us channel our investment as a result of this investment strategy. Because at the end of the day, users do not have all the data to know what is best for them at a certain time. It should not be forgotten that this profile of professionals is there to advise their clients and in most cases for free and without economic costs for bank users.
Not having patience on deadlines
There is no doubt that the psychological element is another determining factor to avoid making mistakes in investment from now on. Regarding this aspect, it should be noted that it is always better to wait for a bad operation and this is a factor that you have to learn so that the scenario you are going through does not pass you at this precise moment. You must bear in mind that nobody forces you to take positions during all months of the year. Not much less. To the point that you must be more selective in the decision than before because what in the end is about preserve your savings above other kinds of technical considerations that emerge from the equity markets themselves.
Don't buy at highs
From now on you will know that it is not a good deal to buy at maximum or very high prices. Even if it is because its potential for revaluation will be less than in other less aggressive scenarios. Of course, you should not forget that these are not profitable operations due to the risk they entail. Whatever the term of stay to which you are addressing right now. On this aspect there is no choice but to analyze that at the end of these movements you run the serious risk that the corrections will be very severe and a lot of money may be lost in these operations. Therefore, you have to reduce this kind of actions in the equity markets.
While on the other hand, it is also a very practical idea that you do not accept all the recommendations in the investment options. In this sense, nothing better than to be very selective in the sources of information since they can lead you to very unwanted situations for all the profiles of small and medium investors. Because in effect, the interests that some of the analysts may form may not be the most desired by all users, whatever the strategy they are going to use to make their savings profitable. As well as the fact that you have to avoid hoaxes that are spread by social media forums and social networks.
Risks of buying resistors
The application of this strategy in investment there is no doubt that in the end it generates a serious risk in the investment. Because if the objective is not achieved the corrections can be very high. Therefore, there is no other option but to wait for these levels to be exceeded with some sufficiency. And then yes, make selective purchases in the equity markets with greater guarantees of success from now on. To the point, this factor is important, which is one of the most frequent mistakes that small and medium investors usually make.
While finally, it is really worth waiting for the resistances to be violated in several sessions in the stock market, not just in a single day. So that you can make the available capital profitable in all the scenarios that the equity markets can present. So that in this way, you are in better conditions to meet your expectations in the investment world. And that is, after all, one of your most immediate goals from now on. Do not forget if you do not want you to reach very undesirable situations for all small and medium investors.